Anyone else starting to notice a change in the tone of the media regarding the health of the market. For the last few months it's been all about recovery. But the last few weeks there have been more and more reports focusing on more pain ahead, double dips, the failure of HAMP, what happens when... etc. etc.
Today we say headlines of 16% decline in pending sales in Nov (oh my god the sky is falling). Heck it was even down in the West which has been the strongest area for months. Is this really news. I don't think so. It just shows that earlier strong sales were pumped up by the looming end of the tax credit.
Another headline today talks about a 30% to 40% chance of us entering into another recession this year. Does anyone really believe we are out of the recession? Maybe somewhere is but California certainly isn't.
I'm also seeing a lot more articles talking about the impending interest rate increases. These same predictions were made last year too and rates fell to the lowest levels in a 100 years. Personally I do think they will go up once the Fed stops buying the MBSs but if that has a cataclysmic effect on the market I suspect they will start that program back up again before the year is out.
The market this year could very well go something like this. Jan through March is busy as buyers rush to close prior to the end of the MBS program and the impending rate hike. April is busy too as buyers rush to get a deal prior to the end of the tax credit. May hits, the interest rates are up, the tax credit is gone and the market slows. Inventory starts to build as sales slow and foreclosures mount due to the HAMP trial period mods ending. The market starts to sieze up again in a repeat of 2007/2008
Once the prices start to fall again this is where the government will come up with another hail mary plan. Something along the lines of 2% or 3% rate mortgage mods through Fannie and Freddie. Now that the government has removed the debt cap Fannie and Freddie can write as much bad paper as they want. There's really only one reason I can think of for removing the debt cap, and that is to prepare those entities to take on gargantuan amounts of debt.